The retiremnet fund, in turn, took things very personally, prompting Dave Urbanek, Public Information Officer at the Teachers’ Retirement System of the State of Illinois (TRS), to write this response:

Please remove your post of Tyler Durden’s inaccurate analysis of the Illinois Teachers’ Retirement System. It is not excellent. It is wrong.

TRS is not in a death spiral. We’ll still be operating and paying pensions for years to come.

We could potentially sell $3 billion in assets if the Illinois General Assembly does not come up with its annual contribution to TRS. The state owes us $2.35 billion. Two other state pension systems are also selling assets until the state makes its payments to them. That is the only reason we are selling assets.

We are not selling assets because we are on the risky side of any investments, as Mr. Durden claims. Here are the facts: We could potentially sell $3 billion in assets. Last year our investment income totaled $4.6 billion – a 13 percent return. We did not lose money. We have $33 billion in total assets. We will pay $4.1 billion in pensions and benefits during the current fiscal year. Do the math. We are not in a death spiral.

What Mr. Durden doesn’t say – and won’t because it ruins his story – is that TRS sold $1.3 billion in assets last year for the same reason: The General Assembly hadn’t yet come up with its annual contribution. The state ultimately sold bonds and made the payment, and we not only got our money back from the assets we sold but did not have to sell any further assets.

"An issue being examined is whether Illinois was taking future savings and treating them as current reductions in the cost of the pension fund, said Robert Kurtter, a managing director in the public finance division at Moody's Investors Service, who said his firm spoke with Illinois officials about the inquiry. One of the measures that Illinois took to save costs was to raise the retirement age for newly hired Illinois workers.

Illinois's pension system is only about 50% funded with liabilities of about $136 billion, according to Moody's. The underfunding, one of the worst among states in the nation, is partly the result of the state frequently skipping its recommended contributions to fund.

Illinois was informed by the SEC of the inquiry in September, Ms. Kraft said. Illinois has included mention of the SEC inquiry in documents being prepared for the sale expected in the next few weeks of a approximately $3.7 billion bond, said Ms. Kraft. The debt is expected to allow the state to make a required pension-fund contribution

The inquiry is the latest example of the SEC probing a state's financial disclosures related to pensions. In August, the federal agency accused New Jersey of failing to properly disclose the true health of its two largest pension funds. New Jersey authorities settled the SEC case without admitting or denying wrongdoing."

Today, over two years after the above news, the SEC finally concluded their analysis of one part of the massively underfunded Illinois Pension system and found the Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. The SEC also said Illinois failed to disclose that it had underfunded the state's pension obligations, increasing the risk to its overall financial condition.

Reuters completes the already well-known picture: "Illinois has one of the worst-funded pension systems in the country. Governor Pat Quinn and the state legislature are currently locked in a political battle as to how best to fix an unfunded liability of $96.8 billion - a gap so large, it has led Illinois to have the worst credit rating among U.S. states."

In chart form, the state's woeful situation is as follows via the WSJ:

Illinois had a response: it neither admitted nor denied the SEC charges. Of course.

Illinois "believed it to be in its best interests to enter into a settlement with the SEC," according to a statement from the governor's Office of Management and Budget. "The State has cooperated fully with the SEC throughout the inquiry."

"The state neither admits nor denies the findings in the order, which carries no fines or penalties." the statement said.

Needless to say, it would be more than ironic to fine an already broke state retirement fund a fine when its original transgression was that it was, well, broke and was misleading investors.

Finally, from the SEC charge:

According to the SEC’s order instituting settled administrative proceedings against Illinois, the state established a 50-year pension contribution schedule in the Illinois Pension Funding Act that was enacted in 1994. The schedule proved insufficient to cover both the cost of benefits accrued in a current year and a payment to amortize the plans’ unfunded actuarial liability. The statutory plan structurally underfunded the state’s pension obligations and backloaded the majority of pension contributions far into the future. This structure imposed significant stress on the pension systems and the state’s ability to meet its competing obligations – a condition that worsened over time.

The SEC’s order finds that Illinois misled investors about the effect of changes to its funding plan, particularly pension holidays enacted in 2005. Although the state disclosed the pension holidays and other legislative amendments to the plan, Illinois did not disclose the effect of those changes on the contribution schedule and its ability to meet its pension obligations. The state’s misleading disclosures resulted from various institutional failures. As a result, Illinois lacked proper mechanisms to identify and evaluate relevant information about its pension systems into its disclosures. For example, Illinois had not adopted or implemented sufficient controls, policies, or procedures to ensure that material information about the state’s pension plan was assembled and communicated to individuals responsible for bond disclosures. The state also did not adequately train personnel involved in the disclosure process or retain disclosure counsel.

And to think that one of these same personnel tried to take us to task over two years ago, when in reality Mr. Urbanek was llikely just as clueless as those people that the SEC described as "not adequately trained."

Sadly, in the end we know we will have the last laugh in the TRF case as well. Sadly: because it means that millions of pensioneers and still working Illinois teachers will lose all the money they have invested toward their retirement. Sadly, also, because this kind of ponzi scheme is now pervasive to all of America, its economy and its capital markets. Which is also the reason even the smallest down day has become anathema to the central-planning authorities who now run the entire economy of the US out of a small corner office in the Marriner Eccles building.

And sadly because where Bernie Madoff got an effective life sentence, when a "legitimate" entity does precisely what Madoff Securities was doing for decades, they get a slap on the wrist, and have to neither admit nor deny guilt.

As long as this treatment of borderline criminal financial malfeasance continues, nothing can and will ever change. Until then, Illinois and all other insolvent states, will fund their underfunded status by selling bonds direct to greater yield-chasing fools. This strategy will work, until it doesn't.

Only then will the Fed's liquidity tide finally go out, revealing that absolutely everyone was swimming naked.

I think the total assets of the private IRA & 401-K accounts adequately cover the government pension short falls across the land, thus the truely worthy of a retirement check will thank you suckers for saving your money in those other government fraud accounts all those years......you should have paid the taxes along the way and stayed out of the trap.

Meet Neil Codell an Illinois educator with a $26 million state pension.

Look for 'Codell, Neil C' -- 4th from the top of the list. His estimated career pension is $26,661,604. That's almost $27 million for a single administrator within just one local Illinois school system (Niles, to be exact).

Whose worried? Not me. There's plenty of folks to tax in Illinoise alone. Hell, Chicago can shoulder this by itself. What's the fuss? The Land of Lincoln citizens got nowhere to go. Pull-eese don't come South.

Zombie is a term I use frequently - I use it to refer to those who do not understand how wrong they are concerning economics, yet can not change their viewpoint due to some fundamental flaw in their hollow head.

Thus many of you here; wrong, as the depression improves you clutch your pet rocks and believe, any day now, the world will end.

The powerful thing about Obama's 2008 platforn was hope, you know. Maybe you all should have hope for a better day and get off your armchairs and help out the economy for once.

"Zombie is a term I use frequently - I use it to refer to those who do not understand how wrong they are concerning economics, yet can not change their viewpoint due to some fundamental flaw in their hollow head."

Funny, that is what I think about YOU!

"Thus many of you here; wrong, as the depression improves you clutch your pet rocks and believe, any day now, the world will end."

Your admit that we were in a depression, and now we're in a deep recession?

Now I have some HOPE that you may someday see the error of your ways. I'll take hope where I can *reasonably* get it.

In case you hadn't noticed, Dr Shitforbrains, there is no recovery; there is 14% unemployment; there are a record number of people on foodstamps and government assistance (feature, not a bug for you), and there is massive rising poverty, caused by your policies.

Well, the government claims that unemployment and food stamps both return somewhere between 179% and 184% back into the economy, so you're more productive than most people who have jobs. Keep up the good work, citizen!

Says the guy who predicted that the first trillion would end the depression, but when it didn't work, in hindisght concluded that it should have been more like three or four trillion, and an invasion by space aliens might have speeded things along nicely. HAHAHAhahaha....

And, of course, there is no provision in the bankruptcy code for a state to file. They simply go dormant...unable to access the debt markets until the great and most powerful "Bernank" eases them quantitatively back into ponzi solvency by purchasing all Illinois municipals and adding them to the Fed's balance sheet. The future is crystal clear.

Detroit is being taken over by the state of Michigan, as a final alternative to declaring bankruptcy. The latter is considered so radical and disruptive that everyone's trying to avoid it, even though, in fact, the city is bankrupt.

In the US legal system, states can't go bankrupt in a formal sense. But they can go bankrupt de facto; a number were such in the 1930s. Soon Illinois and California will join them. It will be funny to watch, because of the strenuous denials. But it's nice to see the SEC waking up to what's been going on and even considering charging someone with criminal fraud. For states in the worst shape and unable to change course, some prosecutions are the alternative to an unavailable judicial bankruptcy.

if the farmers in illinois don't have the courage to pull their honeywagons and manuer spreadera up to the capitol in springfield or daly plaza in chicago and spray and spread, respectively, they deserve to be chinese right now, today.

Everybody gets paid in Illinois. Unfortunately, its not the people who are supposed to be paid, but only the guys who dreamed up a Barack Obama to do their bidding as drone master on the American economy. Poor teachers who believed all this Happy HorseShit, just useful idiots.

Nah, they'll just join up with the FSA and demand an unbridled communist dictatorship under the hilarious assumption - the only thing they care about, when push comes to shove - that it will work for them.

It is the natural conclusion of trusting unaccountable persons with something so important for so long with so little interest.

This is amusing. Why? Read some CONgress Members financial disclosures, some are in fact invested in Cook County bonds (LoL). I don't live there, but I looked it up a couple years ago when I was interested in financial disclosures of my politicians. Apparently, Cook County is a complete dump and should be BK under normal accounting rules (which of course don't apply).

Another agent of the gubermint looks up and says, "chit, where did those icebergs come from!". Fortunately the government is effective only in spending money, not in doing anything useful.

The Illinois "end game" is already written. The Fed will buy Illinois bonds, including retirement bonds, and reissue the debt with the full faith and credit of whatevathefck the Fed's credit rating is at that moment.

I'm starting to resent any inference that the game is anything other than being totally stacked against reality. If your going to party at the Red Queen's court, leave your sanity at the door.

I feel for the teachers. They have to deal with the brats and the asshole parents for 30 yrs and then get shafted out of their retirement. The unions sold these people down the river when they encouraged them to forgo SS contributions and sign on to TRS. Criminals. All of them!

could do it for nothing on a home pc..the reason education costs so much is because it is a social forum and allows parents to park their kids for 6 to 7 hours a day with a stranger in an insecure environment...just saying

Teachers, the puclic school types, are anachronistic, relics with bad attitudes because "no one appreciates the work we do for the kids" and "we're underfunded" and "i hate my kids".
My teacher sister in law.

Think about a 50k a year pension. If someone gave me me a goal of 50k/yr in secure income, I would need them to give me at least 1.5 mil in a lump sum, so that I could ladder some investment grade bond portfolio.

If that same person with a 50k pension has free healthcare, that would normally cost them what....15k/yr?

So 50k pension plus free healthcare means an equivelant of at least someone in the private sector saving about 1.75 mil to achieve the same benefits.

How many people are retiring with 1.75 mil?.....and 50k is nothing. By me they are getting 100k plus. At least 50% of them are on total disability....so that 100k is tax free. So take that 1.75 mil and make it 3 mil above.

i agree..except that the retirement age will be lifted to a barely tolerable age that allows 20 years in retirement, funded by a non-inflation proofed pension of a 5% equal drawdown of a starting capital.

that means a $50,000 costs $1 million (50,000 times 20 years).

small saving from your numbers i know, but when you multiply the difference of 500,000 by the number of retiring people (tens of million?) you get a very large sum.

that sum will of course go to fund managers, bankers and politicians from policies that reduce the rate of increase in deficit funding.

this story is so rich...the incompetent, criminal, porn addicted sec is wrist slapping illinois for failures of fiduciary responsibility when legions of wall street banksters rape the nation daily....the clueless, misinformed, ponzier (or is it ponzeur) dave urbanek declares solvency and the perpetual ability to pay while selling assets and praying for the debt financed state contribution to come through....all the while illinois' finances are in shambles....

the teachers - and i wish all public "servant" whores - will eventually get their just desserts....the problem with socialism is that you eventually run out of other people's money.....

I am a teacher from Illinos. I worked in the public sector for three years a little over a decade ago. I now work at a private school. I cashed out my TRS money and it TOOK A YEAR TO GET MY MONEY! I had accumulated $12,000 in those three years. I called TRS and was constantly being put on hold for long periods of time, or I would get transfered to another person and then hung up on. When I asked if I could roll over my TRS retirement into my ROTH IRA they said NO! I mean, come on, that is standard to be able to roll over your retirement account from one place of employment to the new. As soon as these shinanigans started, I panicked. Then I told them to just give me the money in the form of a check, and they said that the penalty would be large. I told them I didn't care, and that I wanted my money as soon as possible. I got back around $8,000. I'm upset that I got taxed a penalty, but my gut instinct told me to just cash out. Glad I did. That whole TRS is gonna fall like a house of cards very soon. Those public school administrators play a lot of dirty business behind closed doors. I've heard some administrators making 200,000 per year, and then right before retirement jack up their yearly salary by a third -or even more- to get a higher pension! I heard some substitute teachers who were also friends with politicians be able to sub for a couple days and then get a full pension! Boy does that piss me off!

Dalmation I think it is universal that you cannot roll a tax dererred retirement plan, which I believe the TRS plan is, into an after tax (roth) vehicle. I think you could have rolled it into a traditional or rollover IRA, but maybe there is some special guideline I don't know about there.

In any event your gut move to get the money out seems to have been the right one.

"upset that I got taxed a penalty", "friends with politicians...full pension...Boy does that piss me off" So it's not remorse you feel for the three years of accepting stolen funds. Its envy of a parasite more efficacious than yourself?!?
Good for you for getting out of the public make work system. Hopefully your current pay and retirement contributions more accurately reflect the value you bring to the world educating 12 kids a year on a single subject.

When they talk about old people eating dog food .... don't think of that cheap hash made of guts and grain .... think firm chunks of horsemeat in a savory, dark gravy .... served over rice or spiced up with curry powder !

Hey guys - whoever is posting as Dr. Paul Krugman is baiting you. Do you really think that sleazy bastard would expose himself by posting on ZH? OK Dr. krugman - what's your home address and the middle name of your oldest child?

Oh, by the way, my real name is Barack Obama and I know where you all live. And I have my middle finger on the drone button.

It doesn't take a genius to conclude that essentially all public pension systems are fucked. Which means, of course, that nobody will ever be allowed to publically conclude as much and make policy changes while they can still be made. No, the government-trough retirees will BLAME BLAME for the failure of pensions to produce unrealistic returns, and they will whine about all their OTHER money not earning interest (I'll take that complaint from someone without a fancy pension, but if you have one, STFU about interest rates), and will continue to insist on their RIGHT to RAPE future generations, which if you haven't noticed is quite a common theme these days. Sick, sick entitlement society that knows no bounds. This will be the historical view 100 years from now, if society still exists. Guarantee it.

The government workers who are retired now .... have it good .... wait till the peasants go house to house .... and burn ém out ! I'd like to see Barney Frank "necklaced" by his disaffected constituents !

This would be hilarious if it weren't for the fact that all my family on both sides live in the freaking state. Here is an interesting tidbit about the state of illinois pension system. The system is so agregious that the top 100 school administrators in the state account for over a 1 billion dollar liability. Thats right folks, 10 million per administrator. All for the sake of the children. Last I checked, though, states like illinois and new york produce a crop of kids in which only 20% can read/write on a basic college level.

...and they will try to claim it as my debt. What a joke. This whole gigantic ponzi of a country needs to just go down like the hindenberg.

Quick...What national political figiure floated to the top of the Illinois cest pool in record time? Hint: it is not Abe Lincoln. What a great training ground for how to scam people on the national level!

Illinois Governors In Prison: 4 Of State's Last 7 Governors Were Convicted, Imprisoned

_Rod Blagojevich – Governor from 2002 through 2009, when he became the first Illinois governor in history to be impeached. Convicted of numerous corruption charges in 2011, including allegations that he tried to sell or trade President Barack Obama's old Senate seat.

_ George Ryan – Governor from 1999 through 2003. After leaving office, was convicted of racketeering for actions as governor and secretary of state. In November 2007, began serving a 6 1/2 year sentence in federal prison.

_ Dan Walker – Governor from 1973-1977. Pleaded guilty to bank fraud and other charges in 1987 related to his business activities after leaving office. Spent about a year and a half in federal prison.

_ Otto Kerner – Governor from 1961-1968. Resigned to become judge, then was convicted of bribery related to his tenure as governor. Sentenced to three years in prison.

Irregular ineffectual socialist micro economics on a grand scale is what you pride your pale self. How anyone tolarates your blather is still a mystery. rational logic be damed. I saw an interview tonight where you spewed and created bullshit facts to suit another off handed lie to push your central control narrative. You elites have a decent command of the english language to confuse your constituency (uninformed voters) but anyone who graduated from high school with any logic, and a small following of recent history can smell your lies and bullshit miles away. its too bad you hide behnid all the liberal rags you work with. Never challenged by anyone of any caliber to drag your ugly lying ass out on the floor with facts.

No black and white on anything right? Friggin Grey all over you liberal freaks. Your time is coming, not just the fact that you are single handedly helping to crush the Times out of existence once and for all.

At least i should thank you for that. come see the real world some time.

Irregular ineffectual socialist micro economics on a grand scale is what you pride your pale self. How anyone tolarates your blather is still a mystery. rational logic be damed. I saw an interview tonight where you spewed and created bullshit facts to suit another off handed lie to push your central control narrative. You elites have a decent command of the english language to confuse your constituency (uninformed voters) but anyone who graduated from high school with any logic, and a small following of recent history can smell your lies and bullshit miles away. its too bad you hide behnid all the liberal rags you work with. Never challenged by anyone of any caliber to drag your ugly lying ass out on the floor with facts.

No black and white on anything right? Friggin Grey all over you liberal freaks. Your time is coming, not just the fact that you are single handedly helping to crush the Times out of existence once and for all.

At least i should thank you for that. come see the real world some time.

This story is so ironic on so many levels. Been to Chicago lately? Try to go thru the toll booths? You know, the ones were one person is working and 10 booths are empty, so traffic backs up miles? They can't even afford to pay booth workers. Even with sky high taxes. I guess all those IOUs issued by the state the last few years has been overlooked. The state is a giant Detroit.

New rules from the Governmental Acccounting Standards Board and guidelines from the ratings agencies will soon force the state to stopy using its 7.5% discount rate, which will take the total unfunded liability of the state's five pension to roughly $200B, not the official $700B, according to a range of outside experts listed here: http://www.wirepoints.com/springfield-stop-lying-about-the-pension-numbe...

Our media in Illinois prefer to blindly use the state's official numbers.

I am shocked ..... I said SHOCKED that anyone would consider Illinois Politicians crooked and corrupt. You know better than to believe everything you read. OK ... so the Dept of Political Science of Univ of Illinois at Chicago found Chicago the most corrupt city in the nation and Illinois 3rd most corrupt state ..... Big whoop. It was only based on DOJ's report of convictions from only 1979 to 20??. Twenty five years sample is not sufficient...... Besides, do you think the Daleys would stoop so low ???

Do you think Barry Soetoro would lie about his birth information just to become the President of the US??? After all his wife said they did not like the US, and the Stars and Stripes flag "was just a piece of cloth".

For the right price everything can be changed to anything you want to. Just ask any Illinois politician.